The term moral hazard is defined as the lack of incentive to guard against risk where one is protected from its consequences, e.g., by insurance. Moral hazard is probably applicable to a large percentage of Airbnb hosts.
When you host paying guests, your exposure to risk increases but most hosts do nothing to safeguard against the additional risk, relying instead on Airbnb’s Host Guarantee and Host Protection Insurance in addition to their own home insurance policy.
Why Risk Mitigation Makes Good Sense
First, let’s get one thing clear about insurance companies, they are not in the business of paying claims. They are in the business of making money. So when a claim is filed, they are going to find ways to deny it. That’s the insurance business.
Not ever having to file a claim is a far better scenario than having a claim paid. Going through the process of filing a claim, dealing with insurance adjusters, and repairing or replacing the damaged items is time-consuming and at times stressful. If you’ve ever had a car accident, you’ll know what I’m talking about.
Taking steps to minimize your risk of loss is the best course of action. This is within your control and it’s just good practice and makes good common sense. It’s also your responsibility as a host to provide a safe environment for your guests.
If you are a tenant, don’t think that these items are the responsibility of your landlord. You are the one renting the property to guests and therefore, you are responsible.
10 Safety Checks for Airbnb Hosts
We’ve outlined a few steps for you to consider. These steps won’t take you long to check off but they could help prevent the type of situation that has resulted in injury and lawsuits for other Airbnb hosts.
- Regulatory Compliance
Be in compliance with any local regulations that govern short-term renting or “home sharing”. If you’re not in compliance with local laws, insurance companies could deny claims because you are operating an illegal business. If you live in an area where the local authorities have created a special short-term rental license for stays of 30 days or less, it would be wise to be in compliance.
- Safety Inspections
In order to get the license, your property may have to undergo a safety inspection. This is a good thing as inspectors it not only provides recommendations on how to make your home safer but can also be a defense against any claim of negligence for not providing a safe environment for your guests. Even if you’re not required to undergo a safety inspection as part of a licensing requirement, get one anyway. These are trained professionals who can spot things you won’t notice.
- Building Code Compliance
Make sure your property is in compliance with local building code regulations. Non-approved structures or modifications to your property could present higher risk scenarios leading to losses and lawsuits.
- Toxic Gases and Mold
Have your home inspected for toxic and noxious gases and mold. You may not notice a problem but guests might be highly sensitive to environmental factors leading to health issues which could turn into lawsuits or at the very least, negative reviews that will ruin your hosting reputation.
- Securing High-Risk Areas
If you have potentially dangerous areas on your property, make them off-limits to guests or secure them properly. Amenities such as pools, hot tubs, and saunas are highly desirable and also highly risky. You might have a steep staircase or a jungle gym or swingset for kids. Again, added risk. You probably want to make these amenities available to your guests. They attract more guests and probably a premium price for your place.
Add specific instructions on their use as well as safety regulations to your house manual. For each of your higher-risk amenities, attach a printed copy of the instructions and safety regulations. Think about public pools and their posted signs that say no diving, no children without supervision, etc. You’re not doing this to be overly parental. You’re doing it to cover your ass in case of an accident.
- Rust and Rot
Check all outside areas for signs of rust or rot. There have been 2 very high profile cases of deaths occurring at Airbnb rentals, one because of a rusted iron railing on a balcony and another one due to a swing collapsing because it was fixed to a rotten tree. Pay particular attention to any structures designed to support human weight. If you’re uncomfortable doing this yourself, hire a property inspection professional to do a complete safety assessment of your home. Keep all documentation from the assessment, and associated repairs, in a safe place.
Check your wiring. Hopefully, this is something you already take seriously to protect yourself and your family. If it’s been a long time since the wiring was replaced on your property, hire an electrician to perform an inspection.
If you allow families with infants or small children, child-proof your property. Make sure all potentially harmful objects are out of reach, cover any sharp-edges to tables and counters, and keep cables and wiring hidden.
- Snow and Ice
Keep your pathways and driveways safe during the winter. If you’re not able to clear the snow and ice yourself, hire someone to do it for you. Slip and fall injuries are common and if you’re not diligent about keeping your outside areas safe in the winter months, you’ll find yourself on the receiving end of a nasty letter from your guests’ attorney.
In case of fire, keep copies of all documentation relating to safety inspections at another location or in a fireproof safe. Your documentation is your defense against accusations of negligence.
These may sound like extreme measures but they could help protect your guests from a tragic accident and you from a lawsuit that could ruin you financially. Don’t rely on your home insurance to protect you or hope that Airbnb has your back. Be a great host and take responsibility for providing a safe place for your guests.